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the

2014

Consumer Packaged Goods

Innovation Report

.............................................................
A Benchmark Study of Top Companies
in New Product Innovation

An E-Report by

executive summary

in

What the Most Successful Consumer Packaged


Goods Companies Have in Common
If you examined the top-performing consumer
packaged goods companies, could you identify a
formula for their success? Are there common traits that
allow them to consistently launch better products?
Conversely, are there characteristics that innovation
laggards share that consistently hold them back?

everyday new product development practices.


We then created a benchmark of best practices
by examining the key differences between survey
responses from companies with higher levels of
self-reported new product success and those with
self-reported lower levels.

Many studies have attempted to answer these


questions, but Affinnova approached it from a
different angle. Instead of interviewing C-level
executives about their innovation practices (the way
innovation studies are typically done), we surveyed
400 innovators on the front lines directors,
managers and analysts intimately familiar with

Our biggest ah ha: Having a formal innovation


stage gate process or structure is not a key factor
separating top-and bottom-performing companies.
Neither is size or revenue. Instead, organizational
culture and behaviors play the biggest roles in
determining competitive advantage for new
product innovation.

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4 Key Learnings:
1.

The impact of environment is bigger than you thinkWe found that top-performing companies are not just giving
their innovators more intellectual resources (budget, data, technology) for innovation, they are also giving them
more emotional resources (guidance, support and running room). They are less likely to encumber their innovators
with frustrating internal politics and more likely to put the full skills and talents of their people to use. Innovators are
returning the favor by dedicating more to the job and staying loyal to the company.

2. Knowing your consumer is no longer enough to winTop-performing companies are doing a better job of understanding consumer needs through research and data. Thats not surprising. But what is surprising is that they are
also providing innovators with data to benchmark ideas and innovations against competitors, which enables them
to establish differentiated propositions for their products.
3. When it comes to collaboration, not all input is created equalWhile its important to involve consumer insights,
brand and R&D in the innovation process, involving sales can make a big difference. In fact, top-performing
companies are leveraging sales more often in the process from ideation to package design and price considerations.
Sales provides knowledge about competition and consumers, which pays dividends at all stages.
4. Greater risk taking leads to greater rewardsOne important characteristic that distinguishes top-performing
companies is their creativity. Top-performing companies are more likely to encourage their innovators to take
creative risks and try out novel ideas. As a result, they are highly effective at generating the level of breakthrough
thinking required for consistent innovation.

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Areas for Improvement
Through the study, we also learned that CPG companies have much to improve when it comes to
enabling and managing innovation. For example,
overall satisfaction with collaborative practices in
companies is currently very low among front-line
innovators (76 percent believe there isnt enough).

At the same time, many innovators (47 percent)


believe their companies are not taking enough creative risks. By understanding what their front-line
innovators most need and want, CPG leaders can
take action to promote environments and behaviors that boost new product development success.
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inside the data

in

Measuring Innovation Performance


on Six Dimensions
Affinnova conducted its innovation study from November 2013 to February 2014, surveying 400
innovators globally. To participate, respondents had to qualify as being innovators on the front line. In
other words, they had to:

Have worked on a new product innovation project within the past year

Rank below the C-level (VP, director, manager or analyst) to represent an intimate,
day-to-day perspective of the process

Respondents represented a wide spectrum of the consumer packaged goods industry, including food,
beverage, personal and home products, and also some retail. Company size was evenly balanced, with
58 percent of respondents from companies worth $10 billion or larger and 42 percent from companies
below that threshold. A wide range of job functions within innovation were also represented (Fig 1).

....................................................................
Job Roles of Participants in the Survey

Fig 1
39%

BRAND MARKETING/INNOVATION MANAGEMENT

26%

RESEARCH AND DEVELOPMENT


1 1%

SALES/TRADE

1 1%

MARKET RESEARCH/CONSUMER INSIGHTS


4%
9%

FINANCE/ACCOUNTING
OTHER

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IS
CO
MP AC
ET CE
ITI SS
VE TO
AN
AL
YS

Dimensions of
Innovation

CO
NS ACC
UM ES
ER S T
IN O
SIG
HT
S

From this data, we sought to better understand


the kind of environment top-performing
companies are providing innovators as well as the
key behaviors that most drive success.

ENCOURAGEMENT
OF CREATIVITY

D
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BR GY
OF LO
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The survey measured innovation performance on


six performance areas or dimensions, which were
defined based on past academic and industry
research on innovation best practices (Fig 2).
Attitudinal questions were used to understand
respondents perceptions of their organizations
innovation processes. Behavioral questions probed
into specific actions and procedures.

Fig 2

T
EN N
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UR BO
CO LA
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OF

Innovation Scoring System

EFFECTIVE
LEADERSHIP

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profiling top innovators

in

Separating the Best from the Rest


Our survey asked respondents to report their average success rates for new products launched.
Respondents were then grouped into four evenly distributed clusters from lowest to highest average
success rate (Fig 3).

Performance Groupings (determined by new product success rate)


40 percent was the average success rate reported by all respondents in the study.

Quartile
4

Bottom
Quartile
Cutoff

Quartile
3

15%

----------------

Fig 3

Our performance model was based on comparing success rates


reported by respondents. However, we also found a correlation
with launch rates. Respondents from Quartile 1 reported an 18
Quartile
2

Quartile
1

percent higher launch rate than reported by respondents from


Quartile 2 and a 109 percent higher launch rate than reported by
Quartile 4 respondents.

55%

Top
Quartile
Cutoff

Self-Reported Success Rates

Looking at the top-performing quartile and the bottom-performing quartile, we then sought to identify
patterns. Did Top Performers share something in common that contributed to their high new-product
success rates?
Fig 4

Finding #1: Bigger is Not Better


At first, we assumed that top-performing organizations were
larger in size, benefiting from better resources and larger
budgets. But this was untrue. The majority of Top Performers
were smaller in size than the average companies in the study
(Fig 4).

PERCENTAGE OF ALL
RESPONDENTS

over
$20 billion

32%

under
$1 billion

31%

$1-20
billion

37%

PERCENTAGE OF TOP
PERFORMERS

over
$20 billion

29%

under
$1 billion

46%

$1-20
billion

25%

....................................................................
Finding #2: Structure Isnt the Difference

Fig 5

Our second assumption was that top-performing organizations


were more likely than other companies to have formally
established innovation structures and processes that would help
weed out bad ideas before launching to market. But there was
little difference between Top Performers and average companies
in terms of innovation structure (Fig 5).

PERCENTAGE OF ALL
RESPONDENTS

completely
structured

60%

no
structure /
semi
structured

40%

PERCENTAGE OF TOP
PERFORMERS

completely
structured

63%

no
structure /
semi
structured

37%

....................................................................
What Matters: Environment and Behaviors
If size and structure didnt make a difference, what did? Comparing Top Performers against
Bottom Performers in the six areas measured by our study, we identified four factors that lead to
new product development success.
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success factor #1

in

Top-Performing Companies Create Cultures Where


Innovators Thrive and Feel Supported
Compared to Bottom Performers in our study,
innovators at Top Performers are:

1.3x more likely to feel that they have the resources to


innovate globally

1.4x more likely to feel encouraged and rewarded to


take creative risks

2x more likely to feel that their organizations promote


learning and adjustment from failure

2x more likely to feel supported by leadership

2x more likely to feel that they have access to advanced


technology to support new product development

TOP PERFORMER

Were successful when senior


leadership backs the project
with strong resources.

Compared to Top Performers, innovators at


Bottom Performers are:

1.3x more likely to feel that their talents are being


underleveraged

1.7x more likely to feel that politics play a bigger role


than they should in decision making

2.9x more likely to feel that senior leadership is a


barrier to their innovation

3x more likely to consider leaving their company to


work for more innovative companies

3x more likely to feel that they are working for a


company that is losing to competitors

BOTTOM PERFORMER

Were often forced to move


in a direction because of gut
feel or senior management
dictated direction.

Top-performing companies create


learning environments
Q. How would you classify your confidence in
your companys approach to measuring success
and encouraging ongoing adjustment and learning
from failures?
72%

Fig 6

52%

Bottom
Performer

Top
Performer

[Very Confident/
Confident]

..........................

....................................................................
Top-performing companies are
distinguished by good leaders
Q. How would you classify your confidence in
your companys approach to providing clear
direction from leadership on innovation strategy
and practices?
Fig 7

64%

[Very Confident/
Confident]

43%

Bottom
Performer

Top
Performer

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success Factor #2

in

Top-Performing Companies Arm Innovators


with Better Insights
Consumer Insights Drive
Understanding
Common sense dictates that companies that can
deliver on consumer needs will be more successful.
Our study confirms this point. Compared to Bottom
Performers, Top Performers are significantly
more effective at empowering innovators with
data and insights to understand consumer needs
and bring them to the forefront of planning. As a
result, innovators at Top Performers show greater
confidence in their ability to understand consumer
needs, leading to more relevant products. (Fig 8).
BOTTOM PERFORMER

We dont give our customers


what they are looking forwe
give them what
we think they want.

Conversely, Bottom Performers are 1.3x more likely


to feel that their companies arent doing enough to
understand consumer needs (Fig 9).

Competitive Data Drive


Differentiation
Top Performers are significantly more effective at
considering competitive advantages/weaknesses in
their innovation processes than Bottom Performers
(Fig 10). Compared to Bottom Performers,
innovators at Top Performers are more actively
evaluating ideas and innovations in a competitive
context to understand key points of differentiation
and distinct value to consumers. Competitive
evaluation could take the form of benchmarking
of concepts or designs or third-party competitive
analysis. Whats important is that Top Performers
dont stop at considering consumer needs they
also ask, Is our idea better, and by how much?

Q. How confident are you in your


companys approach to bringing

Consumer Understanding

Q. How confident are you in your

with the following statement:

companys approach to considering

We need to better understand

of planning to ensure successful new

consumer needs.

product development?

Fig 9

81%
60%

Bottom
Performer

competitive advantages/
weaknesses to ensure successful
new product development?

Fig 10

79%
61%

[Very Confident/
Confident]

Top
Performer

Competitive Understanding

Q. How strongly would you agree

consumer preferences to the forefront

Fig 8

......................

Consumer-Centricity

......................

....................................................................

Bottom
Performer

Top
Performer

81%
63%

[Strongly
Agree/Agree]

[Very Confident/
Confident]

Bottom
Performer

Top
Performer

....................................................................
Current Insight Gaps
Respondents felt that more consumer and
competitive insights were needed throughout the
entire innovation cycle but were most needed
in the early strategic planning, ideation, concept

Q. At what stages of the innovation process do you think


more/deeper insights are needed?
Fig 11

IDEATION

innovation process. This was true across Top and

CONCEPT

Bottom Performers.

PRICE

53%

53%

STRATEGY

screening and price determination stages of the

More Consumer
Insight Needed

More Competitive
Insight Needed

47%

45%
39%
38%

39%
30%

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success factor #3

in

Top-Performing Companies Encourage Better


Collaboration and Knowledge Sharing Across Teams
TOP PERFORMER

Harnessing the Power of We


Collaboration is often considered a key factor
in innovation. For front-line innovators in our
study, it was the second most critical factor for
success, behind consumer insights. A companys
effectiveness at collaboration essentially measures
its ability to maximize the value of different
stakeholders across the business to spur better
ideas and maximize opportunities. Innovators at
Top Performers felt their organizations were more
effective at supporting and encouraging crossfunctional collaboration for innovation (Fig 12).

Were most successful when


we all do our part very well, in
synchronization, in harmony,
on time and with interest!

Learning from Each Other


As a subset of collaboration, we also examined
how well respondents felt their organizations were
at sharing best practices related to new product
development. Here again, Top Performers
were more successful, revealing environments that
are more collegial and transparent (Fig 13).

[Very Confident/Confident]

Collaboration Effectiveness

Fig 12

Q. How confident are you in


your companys approach to

77%
64%

[Very Confident/Confident]

Knowledge Sharing

Fig 13

sharing best practices of new

cross-functional collaboration to

product development?

development?

Bottom
Performer

56%

your companys approach to

enabling and encouraging


ensure successful new product

67%

Q. How confident are you in

Top
Performer

Bottom
Performer

Top
Performer

....................................................................
Inviting Sales to the Party
Looking deeper into who was

of the innovation process. Among

Sales Involvement

collaborating in the process, we

Top Performers, sales appears to be

Q. Where in your current process is sales/

found something unexpected. All

a valued contributor to idea shaping

trade participating?

organizations were pretty consistent

and marketing-execution strategies

Fig 14

in involving business functions such

(Fig 14). Innovators are leveraging

as consumer insights, R&D and brand

sales unique understanding of the

in new product collaboration. But

market and consumers to make

Top Performers were more likely to

their products highly differentiated

involve sales/trade in critical stages

and relevant.

54%

37%

27%

24%

18%

12%

STRATEGY CONCEPT
Bottom Performers

25%

30%

PACKAGE
DESIGN

PRICE

Top Performers

....................................................................
Collaboration Improves Innovation Performance
In a separate study, published in

found that ideas developed by

achieved better results. Affinnova

January 2014, Affinnova found a

five or more people outperformed

found that ideas developed by

correlation between collaboration and

those developed by two people by

people from three or more different

innovation performance. Comparing

218 percent, based on consumer

functions across the business

CPG innovation projects with different

preference. Teams with greater

outperformed those developed from

levels of collaboration, Affinnova

cross-functional collaboration also

one business function by 94 percent.


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success factor #4

in

Creating New Product Breakthroughs

........................................

Top-Performing Companies Encourage More


Breakthrough Creativity
Respondents considered breakthrough creative thinking to be
the No. 3 most critical factor to innovation in our study, behind
customer insights and collaboration. Here, Top Performers also
excel. On average, we found that innovators at top-performing
organizations were two times more confident in their companies
approach to encouraging breakthrough creative thinking for new
products (Fig 15).

Risk Taking Makes a Difference

Looking deeper into why breakthrough thinking is more common in


Top Performers than Bottom Performers, we found one interesting
connection: Top Performers appear to create environments that are
more supportive and encouraging of risk taking. Prior research in
the field of innovation has established that encouragement of risk
taking is one of four factors most contributing to a teams ability to
develop innovative products. Encouragement of risk-taking affects
a teams willingness to deviate from routine problem solving and try
novel approaches (Cross-Functional Product Development Teams,
Creativity and the Innovativeness of New Consumer Products,
Journal of Marketing Research, February 2001) (Fig 16).

Creativity
Q. How confident are you in your
companys approach to encouraging
breakthrough creative thinking to ensure
successful new product development?
Fig 15

65%

[Very Confident/
Confident]

30%
Bottom
Performer

Top
Performer

.......................
Risk Taking
Q. How strongly would you agree with
the following statement: Creative risk
taking is encouraged and rewarded.
Fig 16

40%

[strongly agree/
agree]

29%
Bottom
Performer

Top
Performer

....................................................................
Creativity Stops at Ideation
Q. Where in the current process is the most creative risk-taking or outside-the-box thinking being encouraged?
Fig 17

54%

IDEATION

(i.e., explore possibilities)

Innovators at both top-performing

20%
6%

STRATEGIZE/IDENTIFY OPPORTUNITIES

CONCEPT SCREENING

and bottom-performing
organizations reported that
the most creative, outside-the-

5%

PRODUCT/SENSORY TESTING

box thinking happens at the

5%

PACKAGE DESIGN

development process. Innovators

3%

PRICE SPECIFICATION

3%

LAUNCH PLANNING

(i.e., distribution, media, etc.)

3%

PORTFOLIO IMPLICATIONS

2%

OTHER

Ideation stage of the new product


reported very little creativity in
the areas of concept, package
design and pricing, showing a
need for organizations to loosen up
the reigns on creativity across all
innovation stages (Fig 17).
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Recommendation

in

To Improve Innovation, Target Behaviors


Looking at the data gathered from frontline innovators, we learn that behaviors and practices play
critical roles in determining new product successmore than size or innovation structure. At the same
time, these behaviors influence the attitudes and feelings that innovators have toward their companies.
While top-performing companies are doing better than others to nurture and support healthy
environments for innovation, overall, most CPG innovators we surveyed are clearly frustrated with
their companies current processes and lack of competitive advantage. In fact, 40 percent of CPG
innovators admitted they are currently considering leaving their companies to work for more innovative
companies. No doubt lack of engagement and low morale are also having an impact on performance.
Among the biggest areas of frustration identified by CPG professionals in our survey:

Inadequate tools: 75 percent believe their companies are using outdated technology for innovation.

Slow processes: 49 percent feel that their companies cant move fast enough to keep up with competitors and
the pace of the marketplace.

Lack of creativity: 62 percent say creative risk taking is not supported by their companies, limiting breakthrough
ideas.

Subjective decision making: 55 percent believe that internal politics not datais guiding most new product
decision making.

Limited customer insight: 66 percent believe their company isnt doing enough to understand consumers and
map product back to their needs.

For CPG leaders and executives, these findingsas well as the characteristics of Top Performersoffer
a general prescription for improving innovation practices. But the best insight can only come from
measuring within. Instead of relying on general industry data, leaders should look to better understand
how their innovators specifically feel about processes and seek to identify the constraints affecting
performance as well as morale.

....................................................................

and culture as it relates to your industry peers.


Diagnose key areas of strength and opportunity.

Assess attitudes toward your company to uncover morale or


disengagement issues that could pose long-term threats.

IS

Dimensions of
Innovation

D
EE
BR GY
OF LO
ST NO
BE ECH
T

CO
NS ACC
UM ES
ER S T
IN O
SIG
HT
S

Understand the relative effectiveness of your innovation process

A
PE CC
TIT ES
IV S T
EA O
NA
LY
S

CO
M

Benchmark yourself using the 6 Dimensions of Innovation.

ENCOURAGEMENT
OF CREATIVITY

F
TO
EN N
EM TIO
AG RA
UR BO
CO LA
EN COL

Want to See How You Compare to the


Top and Bottom Performers?

EFFECTIVE
LEADERSHIP

Contact Us!
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about affinnova

in

Background and Results

Traditional creative research tools and techniques typically


force trade-offs between creative exploration and accurate
prediction. Marketers are forced to suppress creativity to
reliably analyze one or two ideas or to work through complex
processes with long cycle times that still end in suboptimal
executions.
By contrast, Affinnovas technology platform fully unleashes
the power of creativity through a combination of collaboration
software, evolutionary optimization technology and predictive
analytics. Affinnovas collaboration software empowers
teams to fully explore their ideas and create a wide space of
product, advertising and design possibilities. That creative
space of ideas, often representing millions of variations, is
then processed by patented evolutionary algorithms using
individual and collective consumer feedback to find the
optimal concepts or executions that are then measured
against competitive benchmarks to predict performance and
provide actionable business insights.
Affinnovas technology can be applied to a broad range of
creative executions, including product concept development,
product packaging, communication strategies, traditional/
digital advertising, web/mobile site design and store design.

................................................

Affinnova helps companies dramatically improve their


innovation and marketing success rates.

Proven Results

1.8x
2.6x

......................
Reach Across 40+ Countries

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..............................

CPG Clients

Watch our
Intro to Affinnova video

Contact
Affinnova
www.affinnova.com

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